The Blackstone Group L.P.'s (BX) real estate unit is expected to complete the restructuring of Netherlands-based real estate company Multi Corp and take over the latter in the immediate future. Though nothing has been officially declared, internal sources on condition of anonymity confirm the news, according to a Bloomberg report.
The deal has received approval from the European Commission and Turkish antitrust authorities. After the transaction closes, Blackstone will merge the acquired properties with the three Turkish malls that it acquired earlier in Jul 2012 from Redevco BV.
Mutli Corp, which operates in 14 European countries, was burdened with debt as a result of the eurozone crisis. Being unable to meet its financial commitments, the company was in a position to be overtaken by large private equity giants like Blackstone.
Further, in 2011, Morgan Stanley (MS) surrendered 80% of its stake in Multi Corp following a debt-restructuring program. The stake resale kept Multi Corp’s corporate debt and property loans unchanged at €900 million and €1 billion respectively.
Nevertheless, in the past 15 months, Blackstone has taken over Mutli Corp’s 90% of debt and is, at present, in talks to acquire the rest. Delving deeper, we can understand that Blackstone foresees profit avenues in the loss-making company. With the ongoing Eurozone crisis, retail property sales are common in Europe and Blackstone intends to use Mutli Corp to take over such properties at reasonable prices.
Blackstone’s real estate segment generates a substantial portion of the company’s revenues (accounting for about 50% of profits). Therefore, the company constantly strives to expand and strengthen the segment.
Recently, Blackstone set a target of $5 billion for its new European Fund, devoted solely to fund investments in Europe. However, these risky ventures could fall flat on expectations and dent the company’s financials going forward.
Currently, Blackstone carries a Zacks Rank #2 (Buy). Other banks worth a look include Brookfield Asset Management Inc. (BAM) and Fortress Investment Group LLC (FIG). Both these stocks carry a Zacks Rank #2.
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